WE hosted Sembcorp Marine's chief financial officer (CFO) Tan Cheng Tat and senior vice-president (SVP) for investor relations and communications Judy Han for the OSKDMG Asean Corporate Day in Singapore.
Key discussions: The discussions with investors touched on order outlook (particularly from Petrobras), status of jackup options, margins on new rig projects, potential of new products and capacity expansion in Singapore and Brazil.
Contrary to news reports, Petrobras has not cancelled the tender for the 21 rigs to be built in Brazil. Petrobras has entered into direct negotiations with the Sete Brasil and Ocean Rig to get better terms on the rigs.
Given its strong commitment to build a presence in Brazil with its US$550 million new integrated yard in the state of Espirito Santo, management is confident about getting a fair share of new jobs from Petrobras. SMM is bidding for six drillships under Sete Brasil.
High enquiries from established operators: SMM is experiencing strong order enquiries for newbuild jackup rigs, semisubmersible rigs and conversion work. Management is confident of winning more than $5 billion new orders in 2012 ($3.7 billion in 2011), ahead of our forecast of $4.5 billion.
Atwood has not announced its intention to take up the two jackup options which expired on Dec 31, 2011. According to management, other buyers are lining up to take the jackup slots with higher prices. The other six jackup options (Noble and Seadrill) are intact until 2H 2012.
Valuation: Maintain 'buy' with TP of $5.25. We value the stock using:15 times core shipyard earnings, adjust for FY2011 estimated net cash,30 per cent stake in Cosco Shipyard Group at 8x P/E and Cosco Corp at 85 cents.
BUY
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